On 1 December 2020, the Dutch competition authority (ACM) published its long-awaited report on the role of major technology firms (Big Techs) in the payment market. The publication of the report was expected in the summer of 2020 but was delayed due to COVID-19. The study was first announced on 22 October 2019 by the ACM – following up on a request by the Dutch Ministry of Finance to investigate the impact of Big Techs in the Dutch payments market, in particular Amazon, Apple, Ant Group, Facebook, Google and Tencent. The full report is available here, in Dutch only. A summary in English is available here.
Our summary of the report
The main findings in the report are:
- The presence of Big Techs in the Dutch payment market is currently limited but growing. All of the Big Techs active in the Netherlands offer online payment solutions, but mostly in cooperation with banks or payment service providers authorised under PSD2. None of the Big Techs offer services for payments between consumers.
- The ACM expects, based on trends outside of Europe and on the collaborations and acquisitions of Big Techs, that Big Techs will continue to expand their activities on the Dutch payment market. According to the ACM, the incentive for Big Techs to expand activities is not necessarily to generate direct income, but to expand their ecosystems and strengthen their bond with consumers.
- The payment services offered by Big Techs, such as Apple Pay, will become more popular with Dutch consumers in the future. Consumers have a preference for e-wallets that use the Near Field Communication (NFC)-chip technology over e-wallets that use QR-codes.
- Dutch banks both work together with Big Techs – for instance, to offer Apple Pay – and compete with Big Techs, in markets such as contactless payments. This provides opportunities for banks to reach new customers but also places them at risk of losing the customer relations to Big Techs.
In its report, the ACM observes two potential risks for competition in the Dutch payments market:
- Entering the Dutch market for debit cards might be impeded by the fact that Dutch debit cards differ from debit cards in other EU countries. The ACM notes that Dutch cards have a 19-digit primary account number (PAN), instead of the 16-digit PAN found in most other countries.
- Big Techs might leverage the market power they have in adjacent sectors, to impact the payment market, which could be a tipping market. This leads to risks of exclusion, bundling, preferential treatment and excessive data retrieval.
To prevent Big Techs leveraging their market power to the payment market, the ACM recommends:
- amending the PSD2 by imposing an access requirement on Big Techs’ facilitating technology, if the Big Tech acts as a gatekeeper to facilitating the payment services. Such access obligations would be similar to those imposed on account servicing payment service providers (ASPSPs) under PSD2, and should prevent self-preferencing.
- amending competition law to create a new ex-ante instrument focussing on gatekeeping platforms.
Fintech companies are interested in the current PSD2 requirement for ASPSPs to provide access to payment accounts to third party providers. However – as the ACM has noted – Big Techs do not maintain payment accounts, they merely offer technical solutions, such as e-wallets in which a dematerialised version of a payment card can be loaded. It is unclear what data, in the ACM’s view, Big Techs should be giving access to, and how third parties would benefit from that access. For example, we are not aware of any complaints from third parties needing to access the e-wallets that Big Techs maintain. It is therefore unclear to us who would benefit from amending PSD2 in such a way as to impose an access requirement on Big Techs.
There is obviously one caveat to the above comment: the NFC-chip in the iPhone. As previously reported, Apple has placed a technical restriction on access to the NFC antenna which means that only cards stored in the Apple Pay wallet (as opposed to another e-wallet on the iPhone) can be used to make NFC payments. This technical restriction is already subject to (1) a competition law investigation by the European Commission (EC) (see our previous alerts here and here), (2) access requirements imposed under German law (see our alert here) and (3) possible EU legislation in the future as announced in the EC’s Digital Finance Strategy (see our alert here). Given all the activity already taking place around the iPhone’s NFC issue, it is, as mentioned above, unclear to us what else the ACM is hoping to achieve by an amendment to PSD2.
The ACM’s proposal to amend the current competition law framework is surprising since the ACM does not seem to uncover any real competition concerns in its report. In addition, it seems to overlap with the EC’s intention to extend its competition law tools to be better equipped to target Big Techs by introducing an ex-ante instrument (see our alert on the New Competition Toolkit here). It seems to also overlap with the joint proposal by the competition authorities from Belgium, Luxembourg and the Netherlands, in which the authorities show their support for a new ex-ante instrument.